As Gov. Pat Quinn readies the FY 2013 state budget he is to unveil in a few weeks, the conventional wisdom seems to be that Illinois is in really bad shape, a financial basket case about ready to go belly up.

The lamentations are led by the usual suspects, Republicans trying to gain partisan advantage for this year's elections and hyperventilating editorial writers who need to stop, take a deep breath and get a grip on reality.

And the reality is, Illinois is not as bad off as the sackcloth-and-ashes crowd would have you believe. In fact, the state’s fiscal health is getting better, as the actual tax and spending numbers demonstrate, and while tough choices are looming, none are beyond the capacity of reasonable people to make.

Much of the gloom-and-doom stems from three-year projections Quinn’s budget people issued last month that showed modest revenue growth, deep spending cuts and rising pension costs over the next three budget years, FYs 2013-2015.

But the fact the report was issued in itself is a mark of fiscal progress, the result of tough new rules enacted in the last few years that make the entire budgeting process more transparent and more accountable. One can quibble with the governor’s numbers — for example, the sales tax collections are projected to increase over the next three years by a mere $470 million, while receipts already are up $202 million in just the first six months of this year. Or question his assumptions — exactly how would he hold health care spending, largely Medicaid and state workers’ group insurance, level through 2015? Or dispute his priorities — cutting human services again, by another $350 million, while leaving education untouched? But thanks to the new budgeting provisions, those discussions and this spring’s budget-making will occur within a forward-looking framework.

Critics quickly seized on a projected $507 million deficit for the current budget year as proof that Quinn and Democrats were spending the state into the poor house. But a closer look at the figures shows the actual operating costs of state government — education, health care, human services, prisons and so on — are projected at about $24.4 billion. Making the required pension contribution and repaying long-term borrowing brings total spending to an estimated $33 billion, about $118 million less than revenues. What kicks the bottom line into the red is $626 million needed to repay with interest money borrowed last year from other funds.

Going forward, the projection shows revenues outstripping all spending — including the final payments to the other funds— by $286 million in 2013, a surplus rising to almost $800 million in 2014.

In 2015, though, the bottom is projected to fall out, with revenues dropping roughly $1.5 billion while spending increases modestly, $100 million or so, for an $800-plus million deficit. The reason, of course, is that the temporary income tax enacted last year is scheduled to sunset in January 2015. So was all the talk about a “temporary” increase just a smokescreen to disguise permanent higher rates? Did Quinn lie when he said the increase was temporary?

What those promoting the conspiracy theory neglect is the fact the tax increase will expire — no ifs, ands or buts about it — unless new legislation is enacted to keep it in place. Moreover, Illinois in 2014 will elect a governor, one-third of the Illinois Senate, and all 118 House members, so one would logically expect a thorough debate on income tax rates before citizens express their preferences at the polls.

Recall, too, that voters don’t automatically reject the candidate who’s for keeping higher taxes — in 1990, Republican Jim Edgar was elected governor despite supporting continuing higher income tax rates that his Democratic opponent, Neil Hartigan, pledged to let sunset.

Even if the governor and lawmakers choose not to continue the higher rates, other options are available to mitigate the revenue loss. In 1983, for example, personal and corporate income tax rates were raised for 18 months, and when the rates reverted to their old levels, the state sales tax rate was increased to smooth the revenue drop. The rate now may be as high as it should go, but policy makers could impose the sales tax on selected consumer services already taxed in neighboring states to bring in $1.5 billion, roughly offsetting the lost income tax revenue.

Retirement funding costs were another attention-grabber. Quinn has pledged to pay each year the state’s full cost under a 1995 law designed to bring pensions to 90 percent funding by 2045. The outlay is expected to jump to almost $5.3 billion in FY13 from $4.1 billion this year, reaching $5.9 billion in FY15, about 18 percent of all projected revenues.

More than the rising costs, though, alarmists point to an estimated $83 billion unfunded liability, the difference between the benefits to which public workers are entitled and the money likely to be there to pay for them over the next generation or so. But unlike providing services for frail elderly residents or grants for special education students, which have to be paid right away, the unfunded liability is not an immediate problem. Rather, it’s more like a family with a huge mortgage to be paid over 30 years, a month at a time, except the pension balance never comes due because the retirement systems are designed to be in place essentially forever, with new workers replacing old ones in an unending cycle. That’s why despite more than a half century of underfunding, no pensioner has ever missed a benefit check.

A more urgent problem, one might argue, is the state’s huge backlog of unpaid bills, totaling as much as $7 billion. The money is owed right now to a variety of private sector businesses, not-for-profit human services providers, school districts and others, many of them struggling to keep afloat because of the state’s cavalier approach to meeting its obligations.

Rather than fret about what might happen 30-plus years from now, politicians and pundits alike could serve the state better by supporting Quinn’s plan to sell bonds — also known as borrowing money from willing lenders — to pay what's owed the thousands of unwilling lenders we’re currently stiffing. 

Charles N. Wheeler III is director of the Public Affairs Reporting program at the University of Illinois Springfield.

Illinois Issues, February 2012